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ELEMENTS 

of the 

SCIENCE OF SATISFYING WANT 

By 

ROBERT C. BARNETT 

(Mem. Am. Soc. Civil Engineers) 
ECONOMIC ENGINEER 



Single Copies Twenty-Five Cents 

Copyrighted by R. C. Barn^tt, 1919. Kansas City, Mo. 



APR 12 191'^ 



(g,aA52 620i 






ELEMENTS OF 
THE SCIENCE OF SATISFYING WANT 



The thinking person can no longer view with uncon- 
cern the accumulating evidence of the dissatisfaction ex- 
isting in many minds with our present day economic con- 
ditions. The fact that we are today confronted with 
various conflicting opinions held by the leaders of differ- 
ent classes, with a diversity of doctrines preached by 
sociological investigators, with the many discordant 
theories of those seeking to better the situation leads to 
the general conclusion that we need first, above all, to 
seek for a correct and consistent interpretation of eco- 
nomic phenomena. We need a bird's-eye view of such 
economic phenomena and of the forces producing them 
in order to visualize to some extent that system towards 
which we are gradually approaching, so that our present 
efforts may be expended in the proper direction, and with 
the greatest and surest effect. 

The purpose of this paper is to set forth briefly such 
a bird's-eye view in a way that the reader may test its 
correctness as he would that of any other proposition 
based upon human experience, observation and analysis; 
that is, by noting its own consistency and its harmony 
with the other branches of human knowledge. 

The first step is to seek those fundamental data 
about which there can be no dispute, and then by careful 



and consistent analysis deduce the underlying principles 
of economic science. These principles will then appeal 
alike to the scholar and to the layman as do those of 
other branches of science like mathematics, physics or 
chemistry. 

These fundamental data may be listed thus : 

1. The underlying economic motive force that 
gives rise to the various activities of mankind is WANT. 

2. Man has a variety of wants. 

3. These wants are of different orders of urgency. 

4. Individuals seek to satisfy the more urgent 
wants jfiirst. 

5. Many wants are satisfied by the use or con- 
sumption of material things called wealth. 

6. These material things all come originally from 
the earth. 

7. To get these things, some effort or labor must 
be expended. 

8. Different forms of wealth have different de- 
grees of utility. 

9. Because of his varied wants, the individual can 
secure satisfaction only by using or consuming a corre- 
sponding variety of wealth. 

10. Owing tO' the division of labor, the individual 
produces only a very few forms of wealth which in turn 
satisfy a correspondingly limited number of wants. In 
order to satisfy his other wants, he is obliged to exchange 
portions of his own output for similar portions of the 
output of others. 



Let us examine these data and see what deductions 
may be made therefrom. 

It needs but little observation to show that the 
underlying force back of all the activities of mankind is 
the want for something. This want is the economic mo- 
tive force, and, like all forces, tends to bring about read- 
justments among the various related factors until equilib- 
rium is reached. Equilibrium is the ultimate goal. The 
various economic factors are represented by individuals 
OT groups of individuals. So long as there are human 
wants seeking to be satisfied, these readjustments will 
continue and equilibrium will be reached only when the 
maximum amount of want is satisfied. This, then, is 
the criterion by which we test the stability of any com- 
bination of factors— does such such a combination en- 
able the maximum amount of want to be satisfied? 

Now, let us investigate a little more closely the phe- 
nomena involved in the process of satisfying want. The 
reader can readily see by his own observation that the 
act of satisfying want usually involves the use or con- 
sumption of some material thing, either directly or in- 
directly. Those material things which are used in satis- 
fying want, we will call wealth (a definition that is suffi- 
ciently accurate for the present, and which can be ampli- 
fied as may be necessary). The property that wealth 
has of satisfying want is termed utility. The utihty of 
certain forms of wealth can be enhanced by processes of 
manufacturing or by transportation. 

It will also be noted that the individual has a variety 
of wants such as the want for food, clothes, shelter, tools. 



books, paintings, music, ornaments, etc., etc. Some of 
these wants are more urgent than others. For instance, 
the want for food may readily be more acute than the 
want for shelter. He attempts to satisfy his more urgent 
wants first, and consequently, those forms of wealth 
which satisfy the more urgent wants have a higher de- 
gree of utility than the others. Furthermore, it will be 
seen that it requires different forms of wealth to satisfy 
the various kinds of wants, and that the amount of 
wealth consumed influences the amount of satisfaction 
produced. 

The inevitable division of labor which has come as 
a part of the evolution of the social organism precludes 
the individual's satisfying all of his wants by his own 
direct efforts, so that he must exchange some of the sur- 
plus of his own output for a portion of a different out- 
put of some other individual. There is a reciprocal rela- 
tion and effect in this operation, and both individuals are 
enabled to secure a greater satisfaction by such an ex- 
change of products than they could without, hence a 
community of interests is established which will be seen 
to extend to all producers. It next follows that the in- 
dividual is interested in having the output of the system 
of producers as large and as varied as possible, for he 
can then, by the process of exchange, satisfy more wants 
than otherwise, and, because of the reciprocal relation 
between the individual and the other producers of the sys- 
tem, the system is interested in having the individual's 
output a maximum ; because it can, through the process 
of exchanging products, satisfy more want by receiving 



a larger portion of the individual's output. We are thus 
led to the following general conclusion : 

The individual cannot attain his maximum satisfac- 
tion until the social organism attains its maximum, nor 
can the social organism secure its maximum until each 
individual has attained his. 

This is the criterion for equilibrium. 

However, before wealth can be consumed, it must 
first be produced. When, as in a primitive society, the 
individual produces directly the things he consumes, the 
disposition of the output is his own concern. But when 
there are a number of individuals forming a system or a 
producing unit, the output, which is a joint production 
of the unit, or its equivalent must be distributed in some 
manner among the individuals forming the unit. The 
individual may then consume his share or trade any por- 
tion of it for another form of wealth. 

The great desideratum is to secure a maximum out- 
put of utility for each one of the producing units. The 
several varieties of wealth must conform to the various 
wants of mankind and the amount of each variety must 
be adjusted so that each want will be completely satisfied. 

Let us next consider a little more in detail the 
process of producing wealth. All the material things 
which mankind consumes in satisfying its wants come 
originally from the earth, including the air, water and 
the land. It is further seen that these things require a 
greater or lesser amount of effort on the part of man in 
getting them ready to consume. That is, labor is ex- 
pended in producing wealth, or in transforming it, or in 



transporting it, so that it may be ready for consumption. 
Again it will be observed that in the process of produc- 
tion, transformation, and transportation tools, machines 
and various kinds of apparatus and supplies are used 
which have come from some previous form of wealth. 
Such derived forms are known as capital. Furthermore, 
the skill and intelligence with which the various opera- 
tions are carried on affects to a large degree the output 
of new wealth. Such skill and intelligence are classed 
under administration. 

Thus it is seen that there are four general factors 
concerned in the production of wealth, viz : 

1. The Earth, 

2. Labor, 

3. Capital, 

4. Administration. 

These factors may be comprised in a single individ- 
ual, or in various individuals, or in various groups of 
individuals. 

Since the great desideratum is to obtain a maximum 
output in order to produce the maximum satisfaction, we 
next seek for the relation that must exist among the 
four factors in order that the output may become a maxi- 
mum. As the wealth in its basic form comes from the 
earth, all the land must be utilized in some way or other. 
There must be sufficient labor to so use the land and 
develop it to its utmost. There must be sufficient capital 
available for labor to utilize in order that this factor 
may obtain its highest efficiency. The administration 



factor must be present in its most effective form in order 
that a proper balance and co-operation of all the factors 
may be secured. 

There is some definite relation, or certain adjust- 
ment, as yet to be discovered, among these four factors 
that permits of a maximum output being obtained. At 
present this relation can be stated in general terms thus: 

Each factor miist enter into the combination in such 
proportion a\s to develop the full potentiality or capacity 
of every other factor. 

This is the law of balance. 

A more specific expression of this relation calls for 
research work in the field of experimental economics. 

In order for this critical relation to obtain among 
the four factors, there must be an adequate incentive for 
each and every factor to take part in the production 
process. Now, the incentive for any factor to take part 
is the portion of the output it receives as its compensa- 
tion. It has been seen that the output is distributed 
among the factors producing it. It will also be readily 
seen that no factor can receive more than its share with- 
out some other factor receiving less than it is rightfully 
entitled to. Then this latter factor has less incentive to 
contribute its efforts towards producing the output and 
consequently there is a diminution of output and an ac- 
companying reduction in the amount that each of the 
other factors can receive. Hence in the end, all factors 
suffer because one or more originally received more than 
their due share. This causes dissatisfaction and retards 



8 

the equilibration process. As has been seen, a maximum 
output is a condition precedent to equilibrium. We 
therefore conclude that 

In order to obtain a tnaximmn output, each factor 
must he compensated in proportion to its efficiency in 
producing that output. 

This is the law of compensation. 

When this condition obtains, each factor will have 
a relatively equal incentive for putting forth its best ef- 
forts. To make a distribution of output according to effi- 
ciency, there must be some way of measuring efficiency. 
This can be done experimentally by the following process. 
To determine the efficiency of a factor operating in 
conjunction with several other factors, we proceed by 
giving the selected factor a small increment, while keep- 
ing the other factors invariable, and noting the change 
in the output. If the change is an increase in the output, 
the efficiency has a positive value, and the greater this 
change in the output, for a given increment to the se- 
lected factor, the greater the efficiency of the said factor. 
In other words, the ratio of the increase in output to 
the increment of the selected factor measures the effi- 
ciency of that factor. Now, since the output depends 
upon the several factors, the greatest possible change 
in the output would result when an increment is given 
each factor. For the purpose of comparison, it will be 
necessary to make these latter increments equal. With 
all the factors augmented by their respective increments, 
there will be some corresponding change in the output, 



with which may be compared the change first produced 
by giving the selected factor an increment. The rela- 
tive effect, or efficiency, of any factor in producing the 
total change in the output is measured by the ratio of 
the change for a. single factor to the change for all the 
factors. This is the measure of efficiency we are seeking. 

This process leads to such valuable results that it is 
worth while to emphasize it by giving a numerical illus- 
tration. Let us take for example a case from agricul- 
ture. Assume that we start out with $5,000 worth of 
land; $500 worth of labor; $1,000 of capital (not money 
necessarily) in machinery, tools, seeds, fertiHzers, etc.; 
and $1 00 worth of administration. Then let us give each 
factor in succession an increment of $10 worth of like 
kind, while the remaining factors are kept constant. 

For the purpose of the illustration, say that the $10 
increment to the land produces an increment in the output 
valued at $5.00. Then restoring our original conditions, 
we next give an increment tO' the labor factor and note 
the increase in the output. Say that the $10 labor incre- 
ment produced an increment in the output of $10.00 
value. Then, again reverting to our first conditions, we 
give a $10 increment to the capital factor and get, say, 
an increment in the output worth $15.00. We also re- 
peat the operation for the administrative factor and note 
that an increment in this factor produces, say, $20.00 in- 
crement in the output. Now, the total increment in the 
output is equal to the sum of the individual increments, 
thus: 

Total increment in output=5+ 10+ 15+20=50. 



10 

The efficiency of any factor is measured by dividing the 
increment in output due to the increment of the particu- 
lar factor by the sum of all the increments produced in 
the output. Thus : 

Efficiency of the land factor 5/50 

" " labor " 10/50 

" " capital " 15/50 

" " administrative factor . . 20/50 

Having determined the efficiencies of the several 
factors by this process, a comiparison can now be made 
between the actual compensation received by any factor 
and the compensation due it as measured by its efficiency. 
We can thus see where any inequalities may exist and 
know in what direction our efforts for increasing the 
total output should be made. 

It has been seen that the individual must exchange 
some portion of his product for similar portions of other 
products in order to satisfy the maximum amount of 
want. This will now be considered more in detail. 

The exchange of commodities between producing 
units is a voluntary act and is due to the desire of the 
parties thereto to increase their means of producing 
satisfaction. It has previously been shown that a per- 
son possessing various commodities can satisfy a larger 
variety of wants than he who possesses simply one com- 
modity; hence, it becomes pertinent to seek the condi- 
tion that will permit of satisfying the maximum amount 
of want. This is the requisite for equilibrium. What 
relation then should obtain between the interchanging 



11 

products? What portion of its output should each unit 
exchange in order to obtain a maximum satisfaction? 
To return a definite answer to this question would neces- 
sitate knowing the law of variation of the degree of util- 
ity with the amount of commodity, for the commodity 
held by a given producing unit, and the corresponding 
law for the commodity which was being sought. This 
information is not yet available, sO' the question must 
be answered in more general terms. Let us assume sev- 
eral producing units such as A, B, C, D, etc., seeking 
to effect an exchange of their outputs. 

Now, each unit must take from the system, in ex- 
change for its own product, some part of the various 
commodities according to its desire for same, as bal- 
anced against the desires of those competing with it. 
This desire is to be measured by the amount of its com- 
modity which it will give for a unit of another com- 
modity. This is the rate of demand on this exchange 
system. The greatest demand that a person can make 
on this system is the total utility of the product that he 
puts into the system. Or, in other words, it is the de- 
mand of the system for that particular commodity. 
Likewise, the greatest demand that the system can make 
for any particular commodity, is the utility that the vari- 
ous products in the system will have for the holder of 
that particular commodity. This is a reciprocal relation. 

For exchange to proceed, it is necessary that the 
demand of the system coincide with the demand of the 
individual. When that occurs, exchange is consummated. 



12 

The more commodities put into the exchange sys- 
tem, the greater will be its demand on the individual. 
The larger the quantities of commodities put into the ex- 
change system, the greater the demand does it create on 
the individual. The individual is interested in having a 
large demand for his own product, so' he is interested in 
having the other individuals put into the exchange sys- 
tem as many varieties of commodities and as large quan- 
tities as possible in order that he may get more for a 
unit of his own. But this is true for any individual, 
hence, true for all individuals. Thus, a community of 
interests is established. This means that each individual 
must contribute to the exchange system all he can of his 
own commodity, without, at the same time, reducing the 
total utility of his possession. In thus contributing to 
the system, he receives in exchange a portion of that sys- 
tem. The incentive for this contribution is the result- 
ing increase in utility from the new commodity obtained. 
Exchange goes on until the individual's total utility 
reaches a maximum at which point the degree of utility 
of the commodity given out is the same as that of the 
commodity taken in, or, in other words, the incentive to 
exchange commodities has reduced to zero. Any fur- 
ther exchange would reduce his total utility. The meas- 
ure of incentive is the difference in the degree of utility 
between the commodity sought and the commodity pos- 
sessed. When this incentive reduces to zero, exchange 
stops. Equilibrium is then attained temporarily. The 
consumption of some of this wealth by one or more in« 
dividuals disturbs this temporary equilibrium and the 
individual again seeks the market. 



13 

The exchange of weakh brings the individual up to 
the point of consuming wealth. To extract the utility 
from the commodity, it must be used or consumed. This 
is necessary to obtain satisfaction, and is the ultimate 
purpose of our economic system. However, if all wealth 
were consumed as fast as it were produced, there would 
be none available for the production of new wealth and 
as a result, production would drop off and rapidly ap- 
proach zero. It is necessary that a portion of wealth be 
set aside from time to time to aid in the production 
process. Such wealth is called capital. The amount of 
wealth thus set aside decreases for the time being the 
available wealth for consumption. It therefore becomes 
a pertinent question as to how much wealth should be set 
aside for capital. Again the criterion for this is that of 
equilibrium, or the production of the maximum satisfac- 
tion over a given time. The total wealth produced minus 
the amount set aside for capital is the amount available 
for consumption. The desideratum is to make this latter 
amount a maximum. For greater clearness, we may 
write the equation : 

Wealth for consumption=wealth produced — capital. 

But the wealth produced is some function of the 
capital employed in its production. We may then re- 
write our general statement in this form : 

(an undetermined) 
Wealth for consumption=( function ) — capital. 

( of capital. ) 

While the exact nature of this function is yet unknown, 
it is readily seen that the first contribution of capital 



14 

increases the output very rapidly, assuming that the 
other factors of production remain unchanged, and that 
later increments of capital produce a lesser rate of in- 
crease of output. When this function is determined, a 
fairly simple mathematical process will enable a com- 
plete criterion to be developed. We must, therefore, 
look to the field of experimental economics for the final 
form for stating this criterion. 

Summarizing the foregoing, we have for our bird's- 
eye view this statement: 

Want is the underlying Economic Motive Force. 

A series of readjustments is set up until equilibrium 
is attained. 

The criterion for equilibrium is the attainment of 
the maximum satisfaction. This can only be reached by 
the simultaneous achievement of the individuars maxi- 
mum and the social organism's maximum. 

Wealth is used or consumed in the process of at- 
taining satisfaction. 

Many varieties of want call for many different 
forms of wealth. 

Wealth comes from the earth but there is also re- 
quired Labor, Capital and Administrative Talent in some 
certain combination in order to obtain a maximum out- 
put. 

The incentive for each of these factors to- take part 
in the production process is the share oi the output that 
it receives. In order that a maximum output may re- 
sult, each factor must be compensated in proportion to 
its efificiency. 



15 

One form of wealth can only satisfy a limited 
amount of want, hence, individuals must exchange por- 
tions of their products for portions of other products. 
This incentive for this exchange is measured by the dif- 
ference between the degree of utility of the product re- 
ceived and the degree of utility of the product given out. 
When this difference reduces to zero exchange stops and 
equilibrium is momentarily established. 

A community of interests is set up among all the 
parties to the exchange system. 

To extract utility from a commodity, it must be 
used or consumed. 

A portion of the commodity is needed to assist in 
the process of producing a new supply. 

Maximum satisfaction over a long period of time 
can only be obtained by setting aside certain portions of 
commodities for the production process. 

When the maximum satisfaction is attained, there is 
no incentive for a change and equilibrium results. This 
is the best condition that can obtain. This is the condi- 
tion that the basic force is driving us toward. We may 
hasten the result by intelligent co-operation, through a 
correct understanding of the fundamental laws of the 
science of Satisfying Want. 



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